Search engines are tools for enabling Internet users to locate websites of interest. While an enormous volume of information is available over the Internet, effective use of such information depends on the availability of powerful search engines to enable users to easily locate resources of interest. The development and availability of such search engines in turn depend on economic modes that provide an incentive to search engine providers. Because users are often reluctant to pay to use search engines, such economic models generally are based on advertising revenues. In many cases, a search engine interface is provided in connection with a portal or other high traffic site for user convenience and to increase search engine usage. In such cases, sharing of advertising revenues may be governed by agreement between the search engine provider and the hosting site provider. In any case, the revenues that support search engine commercialization are generally based directly or indirectly on advertising revenues.
Generally, to use a search engine, the user enters a certain search word or phrase (“keyword”) related to a topic of interest. Thus, for example, a user interested in researching homes for sale in Denver, Colo. might enter the keyword “Denver Real Estate.” The search engine then executes certain logic to identify and provide a list of sites potentially of interest to the user, generally with excerpted information from those sites to enable the user to quickly determine if the site is of interest. If a site is of interest, the user may click on a link associated with the search results to access the associated website. Such hits are of significant value to website operators. When general or common words are used in connection with the search request, many relevant results may be identified such that the resulting list may extend over several pages.
Generally, some set of rules is executed by the search engine logic to determine a priority of each relevant site so as to develop a sequence for listing the results. For example, the rules may determine a relevance value for each site based on how well the search terms are matched, how many of the search terms are matched, how prominently the search terms are matched, etc. The results may then be displayed to the user in order of relevance.
More recently, the pay-per-click (“PPC”) model for Internet search engines was introduced, also known as the “Pay for Performance” or Cost per Click.” The PPC model allows advertisers to influence the ranking of their websites in search engine results based on the amount of money they are willing to pay for a click from an end user on their web link (“URL”) as shown in the search results. Generally, the more money an advertiser is willing to pay per click for a certain keyword, the higher ranking on the pay-per-click search engine (“PPCSE”) for the keyword in question. That is, the advertiser who has placed the highest bid for a keyword will generally be listed first in search results responsive to that keyword. Because being listed first or at least early in search results, e.g., on the first page of results, greatly increases the likelihood of generating a hit, advertisers are often willing to commit considerable resources to such bidding systems.
The click-costs are paid to the search engine provider and are usually passed on in part to so-called distribution partners such as the above-noted high traffic websites that incorporate certain search technology from the PPCSE. The high traffic that these distribution partners generate usually means that many searches will be conducted on the distribution partner's site as well. The search results are provided by the PPCSE and are shown on the distribution partner's website. The distribution partner is usually paid a fee that is a portion of the click-costs in recognition of the fact that the end users performing the search usually click on one or more links that are displayed in the search results.
Each time an end-user clicks on a link displayed in a search result listing, the advertiser associated with the link that was clicked on must pay the click-cost associated with the keyword or key-phrase to the PPCSE. This is in most cases done by debiting an account of the advertiser maintained by the PPCSE each time the end-user clicks on the advertiser's link in the search results. That link usually takes the end-user to the advertiser's web site. The balance is lowered by the amount of money (“bid price”) that an advertiser bid for the keyword as of the time the end-user clicked on the link associated with the keyword in question.
Over time, search engines have adopted the PPC model, or new search engines have been founded that from inception used the PPC model. Some search engines include variables other than cost that would influence ranking, such as ‘relevance’, but in general, most PPCSEs use very similar models that allow their advertisers to influence their rankings for each keyword that is advertised.
All of the “bidding” (the process of establishing and re-evaluating what price should be paid for each keyword in an account on a PPCSE and modifying the per-click-cost in order to outbid competitors or obtain savings by lowering the keyword bids) was initially done by hand by the advertiser on each PPCSE of interest and individually for each keyword advertised. Over time it became clear that in order to be effective at this process of bidding for keywords, one must have the ability to automate certain aspects of this process, since the amount of work to maintain a large number of keywords on a variety of search engines becomes very time consuming.
In order to be more effective with time and resources, advertisers have a choice of various products and services that perform bid management. Conventionally, bid management has generally been limited to modifying the pay-per-click bids for each keyword in order to:                1. Obtain the desired ranking in the PPCSE for the keyword in question in case the ranking has changed as a result of a competitor bidding more for the same keyword. Example: Advertiser A wants to be in the second position, but is currently in third. The first position has a bid price of $0.25, the second position has a bid price of $0.20, and the third position has a bid price of $0.19. In order for Advertiser A to be listed in second position, he must set the price per click for the keyword to at least $0.21. The competitor that paid $0.20 per click would then be in third position.        2. Decrease the bid amount for the keyword in question because the competitive landscape has changed allowing someone to decrease their bid while maintaining the same position. Example: Advertiser B wants second position and is currently listed in second position. The first position has a bid price of $0.25 per click, the second position has a bid price of $0.20, and the third position has a bid price of $0.15. Changing the bid for second position to $0.16 maintains the same ranking while paying less per click.        
There are various products and services available that will allow an advertiser to automate these bid management aspects of keyword management for a PPCSE. Usually, bid management products or services allow an advertiser to set up a desired ranking and a maximum price the advertiser is willing to pay to obtain the desired ranking.
These bid management products generally attempt to obtain the desired ranking for the keyword in question at a pre-defined interval (e.g. once an hour, once a day, etc) while not exceeding the maximum price. Typically, if the maximum price would be exceeded in order to obtain the desired ranking, the bid management software will find the next best position that will not exceed the maximum price.
Some bid management products and services are also capable of eliminating so called “bid gaps”. Bid gaps are situations where the amount of money advertisers are paying are not sequential, for example: first place is paying $0.25 per click, second place is paying $0.24, and third place is paying $0.20. The gap of $0.04 between second and third place is called a bid gap, since the advertiser in second place could be paying $0.21 to maintain the same ranking. Some bid management software will automatically detect this situation and optimize the second place keyword's price to $0.21 to maintain the same ranking.